Buy Side Convenes in Chicago
Morningstar Investment Conference participants are meeting in Chicago this week to showcase their successes, technology and business wares and discuss strategies, investment performance, trends and expectations.
Primary themes include expanding alternative investments and multi-asset portfolios, as well as generating more dividend yield in a low-yield market. On the operations side, discussions on how to do more with less remain front-burner. Regardless of an investment firm’s size, delegates at the Wednesday-through-Friday event will be comparing notes on how to boost efficiency and reduce risk in their specific areas of responsibilities.
“All asset managers are looking to streamline their operations,” Chuck Thompson, director of U.S. retail at Henderson Global Investments, told Markets Media before the conference.
Firms are looking for a very large menu and high level of expectations from back-office providers and clearing entities, as only the very largest asset managers handle this internally and unified back-office operations make things simpler for firms that are merging, acquiring, or expanding globally.
Thompson will also be on the hunt at the Morningstar event for asset-management talent and capabilities to expand his Chicago-based funds group.
Alternatives are clearly in vogue. While money market reform was a persistent thread of conversation at an industry conference last month, “now, alternatives are a huge theme and everyone is continuing to expand their knowledge base,” Thompson said.
Of an estimated $14 trillion in mutual-fund assets, $800 billion is invested in alternatives. From the point of view of a high-net-worth advisor and retirement consultant, Richard Bregman of MJB Asset Management cautions that while advisors need more arrows in their quivers, they must thoroughly understand alternative strategies and whether they are appropriate for specific clients in different market conditions.
“All our clients have positions in hedging strategies to guard against market risk,” Bregman said. “Lately, we’ve moved away from arbitrage strategies and added direction as opposed to market-neutral strategies.”
Interest-rate risk is also a primary focus, Bregman said. “Everyone is concerned with Fed moves, and potential tail risk that just happens and sets the markets off,” he said.
From the perspective of Artisan Funds’ Mark Yockey, globalization in the investment space is a notable macro trend.
“This year the focus has been on Japan – will Abenomics work?” said Yockey, referring to the economic policies of Japanese Prime Minister Shinzo Abe.
Seeking investments in faster-growing regions of the world at times means buying multi-national companies based in Europe or the U.S., Yockey stated. “Increasingly, looking at any fund’s holdings sorted by country of listing tells you little or nothing about the sources of revenue and profits for those stocks,” he said. “In the end, what will drive investors will be how they can get exposed to the best quality growth at reasonable prices.”